1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preferences shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.
Which of the statements given above is/are correct ?
Correct Answer: (b) 2 and 3 only
Note: Urban Cooperative Banks (UCBs) refer to primary cooperative banks located in Urban and semi-urban areas. UCBs are regulated and supervised by State Registrars of Cooperative Societies (RCS) in case of single-state cooperative banks and Central Registrar of Cooperative Societies (CRCS) in case of multi-state cooperative banks and by the RBI.
Large cooperative banks with paid-up share capital and re- serves of Rs. 1 lakh were brought under the purview of the Banking Regulation Act, 1949 with effect from 1st March 1966, (through an amendment in the Act), and within the ambit of the Reserve Bank's supervision. This marked the beginning of an era of duality of control over these banks. Banking related functions (viz. licensing, area of operations, interest rates, etc.) were to be governed by RBI while registration, management, audit and liquidation, etc. were governed by State Governments through Registrars of Cooperative Societies as per the provisions of respective State Acts. Recently, the Banking Regulation (Amendment) Act, 2020, came into force with effect from June 29, 2020 for Primary (Urban) Co- operative Banks. The BR (Amendment) Act expanded the RBI's regulatory control over cooperative banks in terms of management, capital, audit and liquidation, etc.
Hence, statement 1 is incorrect while statement 3 is correct. As per BR (Amendment) Act, 2020, a cooperative bank may issue equity shares, preference shares or special shares on face value or at a premium to its members or to any other person residing within its area of operation. However, such issuance will be subject to the prior approval of the RBI, and any other conditions as may be specified by the RBI. Hence, statement 2 is correct.